US cotton inventories for 2014-15 rising as China demand drops

US cotton inventory will rise more than 50 percent by the end of July next year as demand from top buyer China tumbles because of a government policy overhaul and farmers in the United States increasing output, according to a Reuters survey of traders, analysts and co-operatives.

Stocks of cotton in the United States, the world's top exporter, will reach almost 3.9 million 480-lb bales by the end of the 2014/15 crop year, according to the median of 13 responses before the US Department of Agriculture issues its monthly crop report on Friday, its first outlook for the next season. That would be up sharply from an estimated 2.5 million bales forecast by the USDA for the 2013/14 season which would be a more than 20-year low.

US exports will take a hit from a sharp reduction in China's import appetite. China's demand for foreign bales is expected to fall to 8 million 480-lb bales next season, down from 12 million this year as Beijing scraps the stockpiling program it began in 2011 that has driven voracious import demand. While traders expect US farmers to boost cotton output this season, uncertainty prevails as traders worry over a severe, multi-year drought in Texas, the largest producing state in the United States.

"Conditions have deteriorated" in some areas of Texas, where production potential remains a "wild card," Gary Adams of the National Cotton Council said at an industry conference last week. The industry group has lowered its outlook by about 1 million bales from a February outlook, he said.